Advisor Group CEO & President Jamie Price

Advisor Group is buying Ladenburg Thalmann, a merger that could result in a firm with as many as 11,500 independent advisors, nine broker-dealers and $450 billion in assets. 

Once the merger is wrapped up as expected in the first half of 2020, Advisor Group would be behind just LPL Financial in terms of the number of indie advisors, making it the second largest IBD by headcount in the business.

“It’s a very bold transaction that could creates a major new player overnight that can toe to toe with the other biggest firms in the independent space in terms of scale and resources,” commented R. Lawrence Roth, managing partner of RLR Strategic Partners and former CEO of both AIG Advisor Group and Cetera Financial.

“Each company brings very specific strengths, and Advisor Group has proven to be very competent in managing acquisitions-driven growth,” Roth added.

The different broker-dealers should remain intact, the firms said: Advisor Group’s FSC Securities Corporation, Royal Alliance Associates, SagePoint Financial and Woodbury Financial, which have about 7,500 registered reps; and Ladenburg’s Securities America, Triad Advisors, Investacorp, KMS Financial Services and Securities Service Network (SSN), with more than 4,000 advisors.

Details of the Deal

For the deal, Advisor Group is paying $3.50 cash for each share of Ladenburg stock, which traded on Monday at $2.81 (and rose after hours to $3.40) earlier on Monday. (Its shares were trading for under $2.00 before news of a possible merger started nearly two weeks ago.)

The total enterprise value of the transaction, though, is valued at $1.3 billion — taking into account Ladenburg’s common stock, preferred stock and outstanding debt. That is about 2.5 times the enterprise value of $520 million, quoted by Bloomberg on Monday.

According to Ladenburg’s advisor on the deal, Jeffries, the deal’s price represents a 74% premium on its stock price before talk about a potential deal started.

Advisor Group will continue to be led by CEO and President Jamie Price, and some Ladenburg executives will join its leadership team. After the deal is completed in 2020, Advisor Group “will have one of the most comprehensive and best-in-class platforms for financial advisors in the industry,” he said in a statement.

(Advisor Group is owned by Reverence Capital Partners, a private-equity group that bought a majority stake in the IBD network in May.)

The combined IBDs will offer third-party clearing via Pershing and National Financial/Fidelity as they do today, Price said, “together with maintaining a ‘small-firm feel’ delivered through the distinct management teams and cultures of a multi-brand network model.”

— Related: Ladenburg Thalmann Exploring Sale: Report